Oil prices experienced a slight increase on Wednesday, despite an unexpected rise in U.S. gasoline supplies, as investors expressed concerns about potential disruptions in crude supplies from the Middle East due to escalating tensions in Gaza. Brent crude futures rose by 24 cents to settle at $85.25 per barrel, while U.S. West Texas Intermediate crude futures increased by 7 cents, settling at $80.90 a barrel.
Tensions have been growing between Israel and Lebanon’s Hezbollah, raising fears of a broader conflict that could involve other regional powers, including Iran, a significant oil producer. Andrew Lipow of Lipow Oil Associates highlighted the geopolitical risks, noting that a war between Israel and Lebanon could lead to Iran’s direct involvement, impacting the oil market.
Turkey’s President Tayyip Erdogan voiced support for Lebanon and urged regional solidarity. Additionally, attacks by the Houthi group on shipping in the Red Sea have bolstered oil prices. The Houthis claimed responsibility for targeting a ship in Israel’s Haifa port with drones in collaboration with the Islamic Resistance in Iraq.
Earlier in the day, oil prices dropped following the U.S. Energy Information Administration’s (EIA) report of a 3.6 million barrel increase in the country’s crude oil stocks last week, contrary to analysts’ expectations of a drawdown. UBS analyst Giovanni Staunovo pointed out that while U.S. stockpiles are rising, inventories are decreasing elsewhere, such as in Japan and Europe, suggesting a tightening market.
UBS predicts a rise in oil prices in the coming weeks. However, traders are concerned about weak U.S. gasoline consumption during the peak summer driving season. Last week, U.S. gasoline demand was down 3.6% from the previous year, at around 8.9 million barrels a day. Gasoline stocks rose unexpectedly, even as refiners reduced output.
Andrew Lipow mentioned that these statistics are likely to disappoint gasoline bulls, stating that unless a hurricane disrupts supplies, the current stock levels should be sufficient for the summer driving season, especially with the Fourth of July approaching.
Union Jack Oil plc (LON:UJO) is an onshore oil and gas exploration company with a focus on drilling, development and investment opportunities in the United Kingdom hydrocarbon sector.
